Here are all the possible critical scenarios of not filing your W-2 forms on time and what it could mean for your business.
Businesses are required to file certain business returns during a tax year to adhere to the regulatory filing and tax compliance requirements of the IRS. And to meet these requirements, businesses often invest in additional tech-first solutions, right from accounting, payroll, tax management, invoice management, and other technical resources to help gather and organize the year-end filing requirements.
There are quite a few reasons why businesses do not resist this regulatory compliance protocol. Major reasons include avoiding penalties, unprecedented audits, and unnecessary attention from the IRS and other federal agencies.
While the regulatory obligations allow employers to file and maintain a compliant relationship with the IRS, not filing the returns on time or abstaining from filing returns with the IRS at all, will have some serious consequences. The other side of this flipped scenario is that while the obligatory consequences are a given, you could be disturbing the ecosystem within your organization by delaying your employee W-2 Forms.
The following will discuss in detail the repercussions of not sending W-2 Forms to your employees and not filing the W-2 Forms with the IRS.
You Could Get Audited
If you find yourself thinking “what could possibly go wrong?” Think again. Everything can go wrong if you do not file your W-2 Forms on time. While the IRS excuses delays in late filing for reasonable causes, willful disregard will not be excused and your organization could possibly be audited by the IRS.
And once the IRS has made up its mind to audit your records, it’s not going to stop at just your late or delayed files. The IRS officers will dig up your historic records in order to check if you have previously filed your returns on time and take feedback from your employees if needed.
To put it simply, audits could mean you’re sacrificing your peace of mind.
You Can Be Penalized
Once the IRS notices that you haven’t filed your W-2 Forms, each return will bring an additional penalty burden of $30 and the number will only go up high if you dismiss the initial notices.
The maximum penalties for missing your W-2 Form files for a small business are $500,000 per year and $1,500,000 for a medium or large-scale business. These penalties will continue to accrue interest (for each form) until all returns are filed with the IRS.
Your Employees Won’t Be Happy
Delaying your W-2 Form filings with the IRS means that you haven’t prepared your returns and you haven’t shared the copies of the W-2 Forms with your employees either, which could further lead to your employees not filing their returns on time.
An unorganized tax regime impacts your overall ecosystem’s performance, with many employees quitting their jobs for a more legitimate or organized business ecosystem or under-performing with dissatisfaction. Either of these scenarios could sharply increase your attrition ratio, bringing down the reputational stakes of your business.
You Are Inviting Federal Attention
When you’re not filing your W-2 forms with the IRS, the IRS doesn’t look at the act as a harmless delay (unless you have requested an extension for filing) but as the conduct of tax evasion. The IRS will pay attention to the income tax returns filed by your employees and will tally up the dots to put the picture together that you haven’t been filing your returns as necessary.
Tax evasion charges, operational prohibitions, penalties, legal assessments, and many other tax-related assessments will only be the start of a very bitter, never-ending legal prosecution. This will further take away your attention from your business operations, giving you no time to fix the issue or move on.
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